Board of Commissioners on Grievances and Discipline Advisory Opinion 2011-1 states in its Conclusion: “It is improper for a plaintiff’s lawyer to personally agree, as a condition of settlement, to indemnify the opposing party from any and all claims by third persons to the settlement funds. Such agreements are not authorized by Prof. Cond. Rule 1.15(d) and violate Prof. Cond. Rules 1.8(e) and 1.7(a)(2). Further, it is improper for a lawyer to propose or require, as a condition of settlement, that a plaintiff’s lawyer make a personal agreement to indemnify the opposing party from any and all claims by third persons to the settlement funds. Such conduct violates Prof. Cond. Rule 8.4(a). The Board recommends that this advisory opinion be prospective in application. The Opinion follows the explicit language in the Rules of Professional Conduct.
Although not clear in the Opinion, it is likely that recovery of potential Medicare lien claims gave rise
to this inquiry, with a defendant requesting indemnity from the plaintiff’s attorney or firm, and not just the plaintiff. Medicare recovery issues have been a “hot topic” in the casualty insurance business, as all such insurers are or will be required to report any claims where the claimant is a recipient of Medicare benefits. Settlements can take months or longer to be resolved, as the parties await confirmation from Medicare of amounts due it through the Conditional Payment Letter process (where billings claimed by Medicare as related to the injury claim may be disputed) through the Final Demand Letter process.
Although lawyers cannot agree to indemnify a third party for such claims, they are liable to Medicare for amounts received on behalf of the client, and due Medicare, in any event, an example is United States v. Harris, U.S. Dist. Court, N.D Virginia, case no. 5:08CV102 (2008). Furthermore, the amount at issue with Medicare may involve some controversy, making resolution of competing interests even more difficult to determine.
Assume a relatively modest personal injury settlement of $15,000, with possible medical expenses paid by Medicare. The defendant would like to pay the funds and close its file, the plaintiff would like his/her share of at least part of the funds, and the plaintiff’s attorney is willing to agree to resolve the Medicare claims. The defendant might have been willing to pay the $15,000 amount, with an agreement of the plaintiff’s attorney to hold the defendant harmless from any Medicare claims. Most likely, the defendant will now hold the funds until the time-consuming Medicare recovery process is completed, thus delaying any payment to the claimant.
The contents of this newsletter are provided for informational purposes only, and should not be construed as providing legal advice. Copyright 2011 Ohio Bar Liability Insurance Company